Tax evasion, political/public corruption and increased taxation: evidence from Zimbabwe

Abstract

Purpose The purpose of this paper is to examine the relationship between tax evasion, political/public corruption and increased taxation in Zimbabwe’s small and medium-sized enterprises (SMEs). Design/methodology/approach The study as a descriptive survey used questionnaires and interviews as research instruments for collecting data. Findings The findings revealed that most SMEs are no longer paying some form of taxes as expected since the Government of Zimbabwe through the Ministry of Finance and Reserve Bank of Zimbabwe introduced the 2% tax levy on all bank electronic transactions greater than US$10 from October 2018. Originality/value The paper recommends that the government should create an independent anti-corruption committee with strong monitoring and regulatory mechanism so as to fight political/public corruption; hence, creating a paradigm of trust and confidence among different economic players. Lastly, the tax authorities should engage all the key economic players when crafting the country’s tax laws/rates so as to promote a sense of equity, equality and economic transparency among citizens.

Tax evasion; public and political corruption and international trade: a global perspective

“…As expected, higher tariffs motivate fraudulent activities of evading, paying custom duties, excise duty and other forms of trade taxes. A recent study from Kurauone et al (2020) find that increase in tax rates by the tax authorities or the government encourages tax evasion.…”

“…Relating to equation (6) and previous literature discussed above, we assume that, to prevent the criminal and fraudulent activities that can be used in various sectors of the economy especially in revenue collection, good governance, transparency, credibility and the monitoring of political and public officials including the tax officials is subsequently expected to follow. This can be achieved in stages particularly in a country with developed legal infrastructure, strong monitoring and regulatory mechanisms (Kimbro, 2002; Kurauone et al , 2020). Additionally, Javorcik and Narciso (2017) argue that exporters from well-governed countries are reluctant to make false transactions and produce fake business documents.…”

“…Some authors such as Kellenberg and Levinson (2019) recommend the strengthening of accounting and auditing standards to protect the tax base. Recently, other authors such as Kurauone et al (2020) investigated the moderating role of International Financial Reporting Standards (IFRS) on legal enforcement/auditing on tax evasion but they ignored the moderating role of controlling corruption on international trade revenue activities (imports and exports). Our study fills a gap in the literature as discussed above.…”

The Use of Surrogate Currency to Address Liquidity Crisis: The Zimbabwean Experience

“…However, in Zimbabwe, liquidity crisis resulted from a combination of many factors and events such as highinterest rates in 1998, suspension of aid to the country by the IMF and the World Bank, land seizure in 2000, the drought in 2001, the Commonwealth suspension of Zimbabwe in 2002, and hyperinflation in 2006 (Khumalo 2017). In addition to these factors, Kurauone et al (2020) also mentioned corruption, and lack of transparency and accountability as causal factors. Further, the country has been under sanctions from the US for a long time now.…”

“…The currency was backed by the government's ability to pay back the debt to Afrexim Bank. Upon its introduction, the government indicated that the surrogate currency would be backed by a US$200 million support facility provided by the Cairo-based Afrexim Bank (Kurauone et al 2020). The surrogate currency was also described by Kuyedzwa (2019) as a false legal currency and a financial instrument used for local transactions only.…”